**Trading Triangles and the Breakout Strategy**

A Triangle is an important formation as it can visualize modifications in price volatility. Triangle formations can provide high momentum trades and limited downsized risk.

**What is a Triangle?**

A triangle pattern signifies a period of decreasing volatility as price moves within the triangle. After a triangle formation is crossed, either upwards or downwards, volatility and momentum booms.

Triangles Formation

Triangles are distinct formations. At the start of this formation, triangles are found at their widest point. Afterwards, they move sideways by narrowing their price range. Finally, when the price crosses above or below a triangle formation, a strong momentum is born.

Applying the Triangle Breakout Strategy

The Triangle Breakout Strategy aims to trade the transition from low volatility to high volatility. But first let’s identify the three (3) categories of triangles.

**Three (3) Types of Triangle Formations**

Triangles can appear in the form of a continuation pattern or in the form of a reversal pattern. There are three types of triangle formations:

- Ascending Triangles
- Descending Triangles
- Symmetrical Triangles

(1)** Ascending triangles**

■ Pattern Type: Bullish Continuation or Reversal Pattern

■ Formation Type: Upward Slope Triangle

■ Trading Goal: Trading the Upside Breakout

Ascending triangles occur when the price has reached a resistance level and then it moves sideways by maintaining a slope of higher lows.

Here is how we may distinguish triangles between Bullish Continuation or Reversal Patterns:

(i) -If an ascending triangle is formed during an uptrend, then this is an uptrend continuation triangle.

(ii) -If an ascending triangle is formed during a downtrend, then this is a bullish reversal pattern.

Ascending triangles can be formed before the release of important news or other data. As the market shows hesitation regarding where it is heading, volatility steadily decreases by forming a sideway formation.

Usually ascending triangles are followed by uptrend breakouts and thus they are considered as bullish formations. These breakouts are often occurring at the end of the ascending triangle {3/4 of the distance between the start of the triangle formation to the lowest point of the volatility range}.

False Breakouts

Sometimes, but not most of the times, ascending triangles break out from below. This is happening if the resistance level is too strong, and there is not enough demand to push the price through it. In this case, the trade will be stopped-out. Ascending triangles as continuation patterns are more reliable than ascending triangles as reversal patterns.

**Elliott Wave Theory -Trading the Elliott Waves**

The Elliott wave theory is a top technical analysis method for explaining and understanding the behavior of any Financial Market.

**Elliott Theory’s Background**

Ralph Nelson Elliott was an American investor (1871-1948) who studied the waving behavior of the US stock market. In 1938, Elliott published its “Wave Principle”, and in 1942, he published also the “Nature Law”. As Elliott himself has explained in the “Nature Law”, the mathematical background behind the Elliott Wave Principle is the Fibonacci sequence of numbers {1,2,3,5,8,13,21,34,etc.}. Each and every important number of Elliott waves theory is also a Fibonacci number.

**The Elliott Wave Theory**

The Elliott Wave Theory is based on a five-wave pattern analysis that includes two phases.

Chart: The Basic Elliott Wave Pattern and the two (2) Phases

Phase-1: Impulsive Phase

-According to the theory, any financial market is advancing in three up waves, 1, 3 and 5, which are separated by two down waves, 2 and 4.

Phase-2: Corrective Phase

-The correction of any advance is happening in three waves (A,B,C).

Chart: The Elliott Wave Pattern and its full extension in 34 waves

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